Do You Know About TDS On Salary: Section 192

TDS on salary is a frequently heard term by all. TDS stands for Tax Deducted at Source. Do you know about TDS on salary: Section 192? If not, we come to your rescue. To start with, let's understand TDS on Salary more simply. When you are looking for a job and you go through the company's offerings, you find the company proposing a certain CTC (Cost to Company), however, once you start working and receive your first salary, you notice that the salary you receive in hand in actually lower than the CTC which was earlier projected to you. Why is that so? Here's where TDS on Salary comes into the picture. Tax is deducted from your salary before you receive it in your hands. This is known as TDS on salary, i.e. Tax Deducted at Source on Salary.

In the Income Tax Act 1961, there's a section that is concerned with TDS on salary. Section 192 of the Income Tax Act is given responsibility for dealing with TDS on salary. Under this blog, we have covered all that you need to know about TDS on salary: Section 192.

Who is authorized to deduct TDS on Salary: Section 192?

TDS on Salary: Section 192 is an unavoidable feature when it comes to employers who pay salaries to their employees. The employee can be a resident or a non-resident. But it is mandatory on the part of the employer to deduct TDS on salary every month as provided by Section 192. An employer-employee relationship, in whichever arena, whether private or public, gives rise to the condition of TDS on Salary.

Who is the employer here?

The employer can be:-

• 1. Firm
• 2. Private or Public Company
• 3. Trusts
• 4. HUFS
• 5. Cooperative Societies
• 6. Individuals
• 7. AOP, BOI

When is TDS on Salary deducted under Section 192?

TDS on Salary under Section 192 of the Income-tax Act requires the deduction of tax when-

• 1. The employer makes payment to the employee.
• 2. The payment made by the employer to the employee must be like the salary provided to the employee.
• 3. The income of the employee is above the amount to which tax is not levied.
• 4. TDS will be deducted no matter if the employer pays the salary in advance on time or late.
• 5. TDS will be deducted even if the employee does not possess a PAN.
• 6. Exemption limits on age limits to which TDS is non-deductible are-
• a. ₹2.5 Lakh- Residents below the age of 60 (these three limits apply only under the old tax regime; under the default new tax regime, tax is nil up to ₹4 lakh, and the Section 87A rebate means no tax up to ₹12 lakh of taxable income, or ₹12.75 lakh for salaried employees).
• b. ₹3 Lakh- Senior Citizens aged between 60 years and 80 years.
• c. ₹5 Lakh- Above 80 years

Steps to calculate TDS on salary: Section 192

• 1. The salary of the employee is calculated for the given financial year. The salary would be a cumulative sum of basic pay along with all the other relevant allowances like Dearness Allowance, HRA, Travelling Allowances, House Rent Allowance, LTA, Employee Provident Fund contribution, bonuses, gratuity, commissions, and any other applicable allowances.
• 2. Exemptions under Section 10 of the Income Tax Act would be calculated to find if any of them applies to the employee. For instance, exemptions can apply to education allowances, medical allowances, housing rent allowances, travel allowances, etc. The third step includes deducting the applicable exemption from the monthly income and the obtained net amount will be considered as the taxable salary.

-3. The employer needs to deduct any investment that comes under Chapter IV-A of the Income Tax Act. The investment may be in the form of an Employee's Provident Fund, PPF, NSC, ELSS, home loan repayment, education loan repayment, or any other deduction falling into Section 80D, Section 80G, etc of the Income-tax Act.

Rate of TDS on Salary: Section 192

There's no specified rate of TDS on salary given by Section 192 of the Income Tax Act. To calculate the rate of TDS on salary, the estimated total income of the employee is taken into consideration which has been earned during that particular financial year. The Income tax slab is taken as the basis for calculating the income of employees which is taxable under the Income Tax Act.

TDS on salary deduction in the case of multiple employers

One might think that calculating TDS on salary in the case of multiple employers would turn out to be a hassle. Let's evaluate the situations in which a need may arise to calculate TDS on salary in the case of multiple employers:

• 1. Simultaneously involved with two or more employers- When an employee is simultaneously involved with two or more employers, in such a case the employee is required to submit details of his salary and TDS in the FORM 12B to either one of the employers. Then one of the employers would deduct TDS from the salary. For instance, Arun is simultaneously involved with two employers. He is employed by Asha Ltd. and London Waffle Private Ltd. He may then choose out of the two, which company/employer would perform a TDS deduction on his aggregate salary.

• 2. Changing job during the year- If a person has changed jobs during a financial year, he/she is required to provide the details and whereabouts of previous employment given in Form 12B to the current employer. The new employer will then consider the previous salary and the applied TDS while calculating TDS for the remaining months.

What is the time limit to deposit TDS on salary: Section 192

The employer is required to deposit TDS on salary, or Tax Deducted at Source on salary to the government at the time of payment of salary to the employee. The following dates must be followed to avoid interest:

• 1. TDS on salary deducted for March: 30th April.
• 2. TDS on salary deducted for April- February: 30 April

Consequences of Non-Compliance under Section 192

• 1. Levy of Interest- An interest of 1.5% will be levied on the amount in case the employer fails to deduct TDS on salary. The interest of 1.5% will also be applied if the employer deducts the TDS but fails to deposit it to the government.

• 2. Disallowance of Expenses- If TDS on salary is not deducted as per regulations on time, the employer cannot claim a deduction of salary expense from the profits and gains.

• 3. The amount of disallowed salary expenses will be

• a. 30% of salary payment will go to residents.

• b. 100% of salary payment will go to Non-Resident

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Frequently asked questions

How is TDS on Salary calculated under Section 192?

TDS on Salary is calculated based on the employee's income, exemptions, deductions, and the applicable tax slab rates. Employers use the income details provided by employees to calculate the TDS amount as per the rates specified in Section 192. Addit

What are the responsibilities of employers and employees regarding TDS on Salary under Section 192?

Employers are responsible for deducting TDS on Salary as per the rates specified in Section 192 and depositing the deducted amount with the government within the stipulated time frame. They must also provide Form 16 to employees, which details the TD